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Credit card surge for Christmas

MARK COLVIN: There's been another Christmas surge in the number of Australians applying for a credit card. One bank is so bogged down it's taking twice the usual time to process applications.

The credit reporting agency, Veda, says there's been a 10 per cent increase in credit card applications in the December quarter each year for the past five years. And there's been a similar rise in the number of defaults.

BELINDA DIPROSE: We've done some research that looks into the last five years of credit trends, and we find that credit card applications peak in November. They're often 10 per cent higher in those last three months of the year. And we see people particularly taking out credit cards and this often leads them to, perhaps, overcommit themselves. And we find that they're more likely to default in the new year.

ASHLEY HALL: How much more likely are they to default?

BELINDA DIPROSE: Eight point five per cent more likely to default in the new year which indicates that people are perhaps over committing themselves and putting themselves into debt stress.

ASHLEY HALL: Does that suggest that the financial institutions aren't checking as hard at this time of year?

BELINDA DIPROSE: No, certainly not. It's not 'til later down the track that people find that they're, they start to struggle. Things start piling up and people get caught up in the Christmas rush in terms of buying presents for their family. And also there's - you've got post-Christmas Christmas sales, and it's easy to get caught up in that Christmas rush.

ASHLEY HALL: While you do record a surge in the December quarter every year, I notice from your figures that you've noticed a drop in credit-card application inquiries between January and October this year compared to the same period in last year. Do you think the public's appetite for credit cards is drying up a little bit?

BELINDA DIPROSE: Yes, we've found that in the - compared to the previous year credit-card applications are actually down 6 per cent. And I know myself I'm reaching for my debit card more often than I am my credit card. And that could be an indication of a wider trend.

ASHLEY HALL: What sort of difference to do you think the changes in the credit reporting aspects of the consumer credit regulations will make to the number of people defaulting on credit cards?

BELINDA DIPROSE: It will really make consumers, I guess, more savvy when it comes to credit. It really brings your credit commitments to light. And what overseas trends have shown is that people do become, I guess more mindful of what their credit commitments are. And we find that there's actually a greater access for people to get hold of credit where they previously may not have.